Riaz Haq writes this blog to provide information, express his opinions and make comments on wide ranging topics.The subjects include personal activities, education, South Asia and South Asian community activities, regional and international affairs and US politics to financial markets and beyond. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://southasiainvestor.blogspot.com

Sunday, March 21, 2010

Israel, Pakistan and Russia Defy Washington

In clear defiance of the US campaign to isolate Iran, Pakistan this week formally signed an agreement for the construction of a 560-mile, $7.5 billion gas pipeline from Iran's South Pars gas field in the Gulf through Pakistan's Balochistan province to Sindh province. The agreement with Iran came within days of America's announcement of plans to push stricter sanctions against Iran, and just days before the start of the planned US-Pakistan strategic dialog in Washington.

"By connecting itself with the world's second largest gas reserves, Pakistan would guarantee reliable supply for decades to come," U.S. energy analyst Gal Luft told UPI.

Pakistan is not alone in snubbing the world's sole superpower. Just last week, the Israelis did the same when they announced plans to build 1600 new units in occupied East Jerusalem during Vice President Joseph Biden's visit there. Subsequent denunciations of Israeli actions by the Quartet (UN, Europe, Russia and US) and angry rhetoric in Washington has only served to strengthen the Jewish state's resolve to go ahead with the settlement construction on Palestinian land.

Turkey, Brazil and China have in the past month each delivered timely snubs of Washington's push for sanctions against the Iranian regime, according to a story in the Wall Street Journal. Russia joined the list of snubbers when it surprised the U.S. delegation this week by announcing that it plans to help Iran launch its first nuclear reactor by July just as Secretary of State Hillary Clinton wrapped up her Moscow visit.

Strangely enough, a country like India which prides itself on its independence in setting foreign policy, is out of tune with the rest of the world in its decision to pull out of the Iran-Pakistan-India gap pipeline project under intense US pressure. It seems India is quite satisfied with the access to US nuclear technology in exchange for obeying Washington on Iran.

The US has so far rejected any civilian nuclear deal with Pakistan. But there are some US analysts, like Christine Fair, who see the benefits of such a deal. Here is how Fair put it in a recent Wall Street Journal op ed:

"Pakistan terrifies the United States because it is a unique nexus of nuclear proliferation and Islamist militancy. But with success in Afghanistan elusive, Washington needs Islamabad more than ever, and vice versa. The two countries have never been able to achieve a durable relationship based on mutual trust. That could be fixed, however, if the U.S. were willing to consider a radical new approach: a policy centered on a conditions-based civilian nuclear deal.

Nuclear cooperation could deliver results where billions of dollars of American aid have failed. Pakistan has long benefited from Washington's largess—including more than $15 billion in aid and lucrative reimbursements since 9/11—while only marginally delivering on U.S. expectations. Islamabad has refused to work against the Afghan Taliban and homegrown terror groups like Lashkar-e-Taiba, or provide Washington access to A.Q. Khan to verify that his nuclear black markets have been dismantled."

Fair argues in her Op Ed that "In the long shadow of A.Q. Khan and continued uncertainty about the status of his networks, it is easy to forget that Pakistan has established a Strategic Plans Division that has done much to improve safety of the country's nuclear assets."

The United States no longer enjoys the kind of unchallenged superpower status it did immediately after the collapse of the Soviet Union. In spite of the fact that the US economy is still the world's largest accounting for 27% of global GDP, and its military is the most powerful with the ability to project American power around the globe, there are increasing challenges to its authority by many nations. In fact, the current US situation is best explained by its parallels to that faced by the Vito Corleone character in the classic movie "The Godfather", as described by "The Godfather Doctrine", a foreign policy parable by John Hulsman and Wes Mitchell. It appears that the US has lost its perceived power to make offers that no one can refuse.

It seems that the elaborate framework of international institutions that US helped architect and build after WW II, such as UN Security Council, NATO, World Bank, OECD, WTO, IMF, and IAEA, through which America exercises tremendous power and control, are being weakened partly due to America's own missteps, and my guess is that these alliances and institutions will not survive beyond the next few decades. There will be a huge realignment of nations, as the powerful new players, including China, Russia, Germany, Japan, Brazil, India, South Africa will demand greater say in the affairs of the world. So will the Iranians, the Koreans, the Turks, the Pakistanis and the Arabs. With their growing economic power, the Chinese are already starting to take steps to replace the US dollar with the Chinese yuan as a major reserve and trade currency in the world.

The US-India nuclear deal, and India's decision to abandon the IPI gas pipeline, and the growing India-US ties appear to be part of a larger realignment in Asia and the world. There is an effort by the US to "co-opt" India as a close ally in the emerging new world order.

25 comments:

Anonymous
said...

Actually its not toeing the US line but the idea of having a large portion of our energy supplies passing through Pakistan epecially in the context of heightened instability in that country that makes us less than enthusiastic.

Besides thanks to massive gas finds in India we are essentially self sufficient in gas now so...

Then there is also the likely collapse in international gas prices given massive shale gas reserves discovered in the US which was expected to be a major importer of gas and now may well become an exporter.

Mr. Riaz,I will tell you the reality of India pulling out of IPI pipeline.A journalist friend of mine told me, who himself got this information from former India's EA minister Jaswant Singh.

Jaswant Singh told that this pipeline will never be built. On asking why, he replied, that If pipeline is built it has to be secured through Pakistan's territory. The responsibility of safeguarding it will lie on Pakistan's army. India will pay security costs to it. Now if an Indian soldier gets killed by pakistan's army on the LOC, the opposition will come thundering in the parliament,saying that we are paying Pakistan to kill our own soldiers. Not being able to defend this charge, the PM will have stop the security payments. This will give pakistan the ammo, of breaking the contract and stop the gas flow to India, which will dissolve all India's investments.

So you see, the real issue is not of American pressure, or of pricing. You may be glad to know that India has started the studies of making an undersea pipeline via Iran. The MEA has constructed a working group on it.

Media reports indicate that days after Iran and Pakistan signed pacts to implement a long-delayed gas pipeline, India said it has proposed trilateral talks in May to address concerns that have been impeding its joining the project.

"We have genuine issues that need to be addressed before we sign up for the (Iran-Pakistan-India) pipeline. We have proposed dates in May for technical level talks in Tehran to iron these out," oil secretary S Sundareshan told PTI here.

New Delhi has been boycotting project talks since 2008 after its concerns of safe delivery of gas were ignored. It wants Iran to be responsible for safe passage of gas through 1,035-km pipeline length in Pakistan and would pay for the fuel only when it is delivered at Pakistan-India border.

Iran on the other hand has suggested a trilateral mechanism, meaning contractual provisions between three countries, to ensure safe delivery of gas to India. Under this system, New Delhi pays for its share of gas even if the supplies were to be disrupted in Pakistan, officials said.

"... As far as India is concerned, we are in consultation with the government of Iran. We have certain concerns. Concerns about pricing, concerns about security, which have been taken up with the government of Iran," external affairs minister S M Krishna said here.---------India wants in-built safeguards in the contract to ensure safe delivery of gas at India-Pakistan border.

While the 1,100-km pipeline from South Pars gas fields inthe Persian Gulf to Iran-Pakistan border would be laid by an Iranian firm, New Delhi wants to take stake in the 1,035-km pipeline section in Pakistan.

India feels that its participation in execution of pipeline in Pakistan would make the project more bankable, reduce the financing cost, ensure timely execution and ensure transparent and efficient management of the operations, they said, adding Islamabad has so far not agreed to the proposal.

Under the terms of deal signed Tuesday, Iran will supply 750 million cubic feet a day of gas to Pakistan for 25 years.

The pipeline has been on the drawing board since the mid-1990s,hen Iran and India inked preliminary agreements totransport gas through Pakistan. It was dubbed the "PeacePipeline" because of hopes it would lead to a detente betweenneighbours India and Pakistan.

India says it fears for safety of the pipeline in Pakistan's Baluchistan province, home to a militant Islamist separatist movement.

Officials said New Delhi is also upset with Iran's frequent changes in gas price.

Iran had originally priced its gas at USD 3.2 per mBtu but later in 2007 revised the rates to USD 4.93 per mBtu at USD 60 a barrel crude oil prices, which was accepted by India. Last year, it again revised it and according to the new pricing formula, the fuel will cost New Delhi USD 8.3 at USD 60 per barrel oil price at Iran-Pakistan border.

Added to this would be a minimum of USD 1.1-1.2 per mBtu towards transportation cost and transit fee that India wouldhave to pay for wheeling the gas through Pakistan, they said.

Gas from the Panna/Mukta and Tapti fields in Mumbai offshore fetches the maximum USD 5.70 per mBtu, while Reliance Industries' Krishna Godavari basin gas has been priced at USD4.20 per mBtu if crude oil price was USD 60 or more.

Officials said Iran was not willing to commit to a supply-or-pay regime wherein it would have been held accountable for non-delivery of gas at Indian border. It, however, wants New Delhi to commit to a strict take-or-pay clause wherein India would have to pay even if it does not take deliveries.

All it now says is that if Pakistan were to disrupt supplies to India, Iran will make a proportionate cut in the quantities to be delivered to Islamabad.

The Reports which you have shown are all a cover up Mr. Riaz. India will never agree to pipeline with the current Pakistani state. As over the issue of pricing, we buy gas from Qatar at a higher rate than what Iran is offering. So you see, what is the real issue.

You ask for a nuclear deal with US. But, tell me - Does Pakistan has the capacity to absorb the deal? Its already bankrupt and its Presidents,Prime Ministers and Army Chiefs routinely take out the begging bowl in full view of the public.. Can Paksitan buy nuclear reactors worth billions of dollars? Where will it get the money from? I dont know what the current reserves are but last time I checked foreign reserve of Pakistan was hovering around the 10 billion dollar mark, and that too after huge IMF packages..

Now, tell me if Pakistan really has the stomach to absorb this deal? It can only divert the money given to by the US as aid back to the US! What a tragedy.. Get 'X' amount of aid from a country to feed the hungry and build schools,roads,etc and give that money back to the same country to buy nuclear tech.. Forget schools and roads Pakistan need nuclear tech!

I think the quest for Pakistan for a Indo-US type deal is more to satisfy its ego(as many of its actions are towards India) and get a false sense of achieving parity with India and hardcore Intelligent thinking.

Last time I checked you were charging Ms.Fair of double speak when I showed to the link where she takes back what she said about India playing dangerous games from Afghanistan.. What changed? Oh right, she said something pro-Pakistan..

anoop: "Does Pakistan has the capacity to absorb the deal? Its already bankrupt and its..."

In your zeal to disparage Pakistan, it's clear that you do not understand how big energy and power projects are financed. Most countries, including India, do not pay for these things out of their reserves.

Most infrastructure projects in developing countries, including India, are financed by a combination of soft loans and vendor financing.

As an example, India has asked the World Bank to raise the amount of money India can borrow as soft loans, generally considered aid, from the bank for its infrastructure projects, according to Times of India. At present, India can borrow up to $15.5 billion in soft loans as per the SBL (single borrower limit)in soft loans fixed by the Bank.

The Indian government has estimated it needs $500 billion over the five years to 2012 to upgrade infrastructure such as roads, ports, power and railways.

"Under the strategy, the bank will use lending, dialogue, analytical work, engagement with the private sector, and capacity building to help India achieve its goals," the World Bank said on its website.

The International Bank for Reconstruction and Development would lend $9.6 billion and the International Development Association would make available $4.4 billion of funding, according to India's Financial Express.

Only 30 per cent of India's state highways have two lanes or more, and the majority are in poor condition, the bank said. Electricity generation capacity has grown at less than 5 per cent in the past five years, much slower than overall economic growth of about 8 per cent over the same period.

In general, India is like any other developing country. It continues to have heavy reliance on foreign aid, including grants and soft loans, for many of its poverty, sanitation, and nutrition programsas well as infrastructure projects.

One thing to observe- India asks for loans,as does any developing country, but, Pakistan asks for aid.. Hope you know the difference..

I can produce many examples of Pakistan asking for loan-waiver in the past decade alone if you want me to.. Pakistan is now a dangerous cocktail of Terrorists,bankrupt economy,poverty,Radical Islam and most dangerously Nukes. Why would you want to add an additional burden on the already stretched Military of Pakistan? There are already 10,000 manning nuclear facilities in Pakistan. Why would you want to add a few thousand more and increase the burden?

Pakistan's neighbours will be up all night having nightmares about Radical Islamists attacking the sites. Or worse- The Radicalized people getting into the system.

Let the Paksitan military consolidate its territories it got back from the Taliban. They have to execute the Hold in COIN. For that they need heavy manpower.

COIN requires heavy deployment of soldiers to hold the territories they have gained. Why do you want to stretch the resources of the Military?

Due to the absence of required resources US has been not able to hold the territories it occupies in Afghanistan.. Pakistan should not commit this mistake after heavy loss of lives(more than loss of lives in the wars fought with India). Also, North Waziristan should be on the radar after the capture of the South.. After all it is part of Pakistan according to world maps,right?

anoop: "I can produce many examples of Pakistan asking for loan-waiver in the past decade alone if you want me to..."

Soft loans are not the same as commercial loans, and they have provisions for payment waivers under certain circumstances. That's why they are called "soft loans".

The bottom line is that Pakistan has not defaulted on its sovereign debt.

anoop: "Pakistan's neighbours will be up all night having nightmares about Radical Islamists attacking the sites. Or worse- The Radicalized people getting into the system."

This is just false propaganda from Indian govt and other Pakistan haters in India and the West who don't want Pakistan to successfully satisfy its growing energy needs.

As Christine Fair has argued in her recent Wall Street Journal Op Ed, "In the long shadow of A.Q. Khan and continued uncertainty about the status of his networks, it is easy to forget that Pakistan has established a Strategic Plans Division that has done much to improve safety of the country's nuclear assets."

"This is just false propaganda from Indian govt and other Pakistan haters in India and the West who don't want Pakistan to successfully satisfy its growing energy needs."

Yes, people in India and the West sit up at night plotting how to damage Pakistan's energy sector. What non-sense.

When you live next to an unstable,nuclear weapons power country ,which not too long ago had given up vast spaces of territory to the Taliban and with a large section of Media and Elites blaming every bomb attack(almost a dozen a month) on everybody else but the perpetrators-Taliban then you will understand what kind of fear that grips us.

Plus, we almost forgot about AQ Khan. We all know he was just the front for the military to get involved in nuclear proliferation! Infact, he was just another guy when suddenly Musharaff decided to make him the scapegoat.

Should an irresponsible power be given such high tech?

Due to Pakistan help Iran is on its way to become another nuclear power. Dont even talk about North Korea! Its virtually blackmailing the peaceful South Korea. Pakistan employed the barter system with North Korea. You give us Missiles tech and we will give you nukes, it said to the Communist country.

I imagine Paksitanis would NEVER talk about nuclear tech if India hadn't gone and gotten a deal with the world community. So, its more about seeking parity with India than "energy-security".. Admit it- Its about big,massive egos in Paksitan..

India was actually rewarded for being a responsible power. We treated this technology with the respect it deserves. In the end we benefited. During and before the 90's India like Pakistan weren't that different economically.. Pakistan even had a better economy.. But, we didnt open up,what an American calls, a "nuclear-Walmart"..

"In case you haven't heard, Pakistan already has the technology. What Pakistan needs is help in expanding its civilian use to meet its undeniable energy requirements."

If so then you can always build a reactor! A reactor is just a controlled bomb, isn't it? Why do you need the deal?

The fact is it'll take billions of dollars and many many years till Pakistan gets the technology right and there are lot of other issues too including safety. Pakistan has no stomach for throwing this kind of money around.

"India has been "rewarded" for toeing the US line against Iran and China....a step that makes a mockery of US stand on nuclear non-proliferation against Iran. It exposes America's double standard. "

China voted for us,as did Pakistan of all countries, in IAEA. Remember?

Without Pakistan or China's vote we wouldn't have gotten through the IAEA. We have gotten here with the help of both China and Pakistan who, like the International community have recognized a power in the making. If China can be given the status of a nuclear power so can we. We are after all going to be among the top 3 biggest economies in the world by 2050 on current growth rates. It was only logical that a future world power like India be given official nuclear status.

Surely, Pakistan,which can be a middle level power at its best, cannot hope for being treated like India. This is absolutely absurd. There are not many countries like India or China in the world. Not only we are territorially big but we also have various kinds of resources. Only few countries have/already have the potential to be bracketed with us like USA,China,Brazil,South Africa,Russia,France,Germany,Mexico.. Pakistan neither is that big nor can it sustain big populations of the scale that reside in India or China. Due to this Pakistan forever will remain a middle level power. But, nothing is wrong being a middle level power and its nothing to be ashamed of.

And, one more thing. When did we toe the US line with regard to Iran? I guess you must be talking about 2 things in particular.1)IPI and 2) India voting against Iran in an International forum.

1) is pretty easy to explain. Pipeline has to pass through hostile territory and unless Pakistan and Iran guarantee that the supply will not be jeopardized it would be foolish to dump few billion dollars for the IPI. Also, Rahul makes an excellent point on this.

2) is driven by hard political reality. The fact is India doesn't want another nuclear neighbour! Also, Iran needs India's help in fighting the Taliban and vice versa. We are in Afghanistan through Iran! In a way, we are having one's cake and eating it too.. Iran and India are still allies when it comes to things of importance to India..

If you want to call it US pressure then nobody can stop you. As long as there is a naughty neighbour like Pakistan around supporting anti-shia/sunni/or-whatever terrorist groups in the territory India and Iran are going to be together.

anoop: "If so then you can always build a reactor! A reactor is just a controlled bomb, isn't it? Why do you need the deal?"

Pakistan needs the deal for the same reason India did. Removal of US sanctions followed by the IAEA vote which US lobbied for opened up the flow of civilian nuke investments in India and made it possible for foreigners to make deal in India.

anoop: "China voted for us,as did Pakistan of all countries, in IAEA. Remember?"

There is a difference between voting for an not opposing. Here is how a news report described it:

"Pakistan, which did not oppose the deal, had expressed its concern that the safeguards agreement should not be “discriminatory.” ElBaradei assured Pakistan at a post-meeting press conference that “there was no reason why Pakistan cannot benefit the same way as India” if it brought a similar safeguards agreement before the IAEA.

anoop: "And, one more thing. When did we toe the US line with regard to Iran? "

It's quite plain to the world. You just have to open your eyes to see it. Manmohan Singh's brown-nosing in the White House was pretty obvious when he said to Bush, "America loves you, Mr. President." No Pakistani leader has ever stooped that low.

The BBC reporting that Pak govt is seeking supreme court approval to pursue Dr. AQ Khan over his alleged interview with Washington Post regarding proliferation to Iran and Iraq. It comes days before discussions in Washington for a possible civilian nuke deal with US:

It simply is a case of being able to serve your national interests, which only democratically elected representatives are capable of doing(not because they are capable, the system has it,s in built strength), had Nawaz Sharif not been our PM in May 1998, our postion in region would have been far differrent than what it is. My national pride is restored to some extent observing our country,s soveriegn status rising.

While I still believe that Pakistan's political leaders, Sharif and Zardari included, are corrupt AND incompetent, I do appreciate a little backbone they show on rare occasions, such as the decision to test nukes in 1998 and to sign Iran gas deal now.

Successive Pakistani governments, both military and civilian, have been consistent in refusing to sign the NPT, and never gave up on the idea of buying gas from Iran, in the face of tremendous US pressure. It has more to do with near national consensus on these issues than the courage or conviction of Pakistani leaders. They fear the powerful domestic backlash if they give in to external pressure on these key issues.

Clearly, relations with the US are of the highest priority for India, as they are for Russia or China. But the similarity ends there. For the foreseeable future, despite the heart-warming prognosis by the world community hailing India as a potentially emerging global player, the hard reality is that such a prospect remains distant in the scheme of things. When it comes to issues such as the situation around Iran, India lacks the wherewithal of Russia or China.---On the other hand, India is almost similarly placed vis-a-vis the US as Brazil or Turkey are. The fact that these two countries, which are close partners of the US, have not drawn Washington's ire shouldn't go unnoticed. New Delhi's apprehensions that any independent line on the Iran nuclear issue might upset the rhythm of US-India relations seems, in introspect, to have been entirely unwarranted. Countries that have taken an independent line on the Iran nuclear issue during crucial IAEA votes - Pakistan, Afghanistan, Malaysia, Egypt - have not exactly come to grief. On the contrary, India's traditional ties with Iran grievously suffered when it began blindly toeing the American line.

Worse still, Tehran harbors a suspicion that New Delhi might have used its ''Iran card'' to ingratiate itself with the George W Bush administration. The signs are that Tehran has made a cool analysis about damage control and has decided to more or less relegate its ties with New Delhi to a place on the backburner, even while going through the occasional motions of friendship and exchange of views that the two neighbors cannot do without.

New Delhi needs to take stock that Obama is an extraordinarily gifted politician endowed with intellectuality and it is conceivable he may come up with new thinking and a new approach to the problem. Monday's swap deal underscored indisputably that US policy on Iran is in a cul-de-sac. A reversal becomes inevitable. To be sure, Obama has taken note that Turkey and Brazil highlighted the existence of a whole world beyond the secretive, cloistered framework of the "Iran Six".

New Delhi has of late been attempting to follow in the footsteps of Russian and Chinese policies. Here too, a rethink is in order. India needs to factor in gains accruing to Russia and China from a continuing US-Iran standoff. The Western embargo against Tehran is keeping Iranian energy exports out of the European energy market that might otherwise have competed with Russian supplies. Energy exports constitute the single-biggest trump card of Russian foreign policy to modulate Western policies toward Moscow.

As for China, it is indeed having quite a field day as an exporter of goods and services to Iran as well as for advancing plans to evacuate Iranian gas and oil through pipelines across Central Asia that are nearing completion. In sum, Beijing has done splendidly well.

--------India's diplomatic ingenuity lies in working on the US thinking to persuade it to become a partner in the Iran pipeline project. The prospect offers a "win-win" situation. Iran doesn't hide its panache for Big Oil. The US has stakes in India-Pakistan normalization. India and Pakistan's energy markets offer massive business for American oil companies. The US involvement acts as a guarantee for the pipeline. Least of all, Washington too wishes to make Tehran a stakeholder in regional stability.

Russia and China, therefore, have complementary interests in shepherding Iranian energy exports to the Asian market. How is India placed in the energy equations? On balance, India in no way benefits out of the US-Iran standoff and, in fact, has a great deal to lose as regional tensions prevail in a region which forms its extended neighborhood. The Iran nuclear issue potentially can complicate the US-India strategic partnership as New Delhi will be firmly opposed to any use of force in the resolution of the problem.Equally, the bottom line is that Iran is a major source of energy supplies for the expanding Indian economy. In geopolitical terms, a leap of faith uncluttered by the debris in the India-Pakistan relationship will dictate that the Iran gas pipeline project offers a rare opportunity for New Delhi to make its western neighbor a stakeholder in regional cooperation. Even at the height of the Cold War with nuclear armies preparing for Armageddon, pipelines criss-crossed the Iron Curtain. Alas, the Indian strategic community has a closed mind, as things stand, when it comes to developing a matrix of regional cooperation that even remotely includes Pakistan.

India's diplomatic ingenuity lies in working on the US thinking to persuade it to become a partner in the Iran pipeline project. The prospect offers a "win-win" situation. Iran doesn't hide its panache for Big Oil. The US has stakes in India-Pakistan normalization. India and Pakistan's energy markets offer massive business for American oil companies. The US involvement acts as a guarantee for the pipeline. Least of all, Washington too wishes to make Tehran a stakeholder in regional stability.

New Delhi should closely study Turkey's motivations on the Iran nuclear issue. Turkey has interests almost similar to India's and its supple diplomacy enables it to astutely position itself for the day when the US-Iran standoff dissipates. Turkey estimates that Iran is a neighbor (although they have had a troubled relationship) while the US is a key North Atlantic Treaty Organization ally and any midwifery in the inevitable US-Iran rapprochement becomes a strategic asset for Ankara's growing stature as a regional power.

Indian diplomacy has lately made some interesting moves toward Iran, beginning with Foreign Secretary Nirupama Rao's visit to Tehran in February. The desire to craft a fresh approach is also evident in External Affairs Minister S M Krishna's consultations this week in Tehran. The path is strewn with thorns, as the Iranians harbor a deep sense of hurt about India's stance at the IAEA votes. Therefore, as the US's tug-of-war with Iran intensifies, New Delhi faces the challenge of not treading on Tehran's sensitivities all over again.

On the whole, Indian policy is principled, especially its line that the IAEA ought to be in the driving seat rather than a cabal of states with dubious intentions. But New Delhi is lurking in the shadows in a blissful state of masterly inactivity.

India should openly join hands with Turkey and Brazil in opposing the need for a continued push for UN sanctions against Iran. No doubt, the diplomatic initiative by Turkey and Brazil creates an altogether new situation and Indian diplomacy should grasp its importance and seize its potentials.

Here are excerpts from a Washington Post report about China-Pakistan nuclear deal:

"President Obama has strongly advocated for restrictions on the spread of nuclear technology. But his administration has said little publicly about the China-Pakistan deal. Meanwhile, the administration announced Tuesday that China, despite its misgivings, had signed on to a draft U.N. Security Council resolution sanctioning Iran."

"A senior administration official, speaking on the condition of anonymity to talk more freely, said the United States is waiting for China to detail how it plans to proceed with this transaction. "We don't have much clarity, and so the issue has not ripened in the government," he said. He said any claim that the reactors are grandfathered "would be a hard case to make," but China could seek a formal exemption from the guidelines -- which are voluntary in any case.

Indeed, complicating matters is that the United States, after hard lobbying, in 2008 won a specific exemption at the NSG for trade with India, Pakistan's nuclear-armed rival. Pakistan has long wanted its own exemption -- and the United States has refused -- but the administration may not want to roil relations with Islamabad at a time when their partnership on counterterrorism is seen as crucial."

"Daryl G. Kimball, executive director of the Arms Control Association, said the China-Pakistan deal "is some of the fallout of the India-U.S. civil nuclear agreement" -- which included the special exemption for nuclear trade. The deal was a Bush administration initiative -- but was avidly supported by then-Sens. Barack Obama, Joseph R. Biden Jr. and Hillary Rodham Clinton."

Baluchistan, Pakistan’s biggest province, rarely gets much attention from the international media, and what little it does is dwarfed by that showered on Afghanistan. So it is with a certain amount of deliberate provocation that I ask the question posed in the headline: Is Baluchistan more strategically significant than Afghanistan?

Before everyone answers with a resounding “no”, do pause to consider that China – renowned for its long-term planning – has invested heavily in Baluchistan, including building a deep water port at Gwadar on the Arabian Sea to give it access to Gulf oil supplies. The region is rich in gas and minerals; attracting strong international interest in spite of a low-level insurgency by Baluch separatists.

Bordering both Iran and Afghanistan, it lies along the sectarian and geopolitical faultlines that have fissured the region since the 1979 Islamic Revolution in Iran and Soviet invasion of Afghanistan later that year. Its capital, Quetta, is often cited by Washington as a haven for the Afghan Taliban in the so-called Quetta shura, who operate independently of the more secular Baluch separatists.

The province is also a source of friction with India, with Pakistan accusing it of using its presence in Afghanistan to fund the Baluch separatists, a charge Delhi denies. Whatever the rights and wrongs of that argument, you can be fairly sure that anywhere lying on the intersection of Indian, Chinese and Pakistani interests will be strategically far more important than it might appear on the surface.

In that context, Forbes Magazine has a must-read take-out on China’s drive to develop its presence in Baluchistan.

“In the Pakistani province of Balochistan, South Asia and central Asia bleed into the Middle East. Bordered by Afghanistan, Iran and the Persian Gulf, and well endowed with oil, gas, copper, gold and coal reserves, Balochistan is a rich prize that should have foreign investors battering at the gates,” it says. “But for a half-century it has been the exclusive playground of the Pakistani government and its state-owned Chinese partners. China would prefer it to stay that way.”

For an entirely different view, Informed Comment has a guest contribution up by Berkeley academic Kiren Aziz Chaudhry. The arguments can be a bit distracting if you don’t buy into conspiracy theories about the reasons for the U.S. presence in Afghanistan. But do persevere until you get to the point where the writer identifies Baluchistan as the main centre of interest for the many rivalries across Afghanistan and Pakistan: “The fulcrum is the province of Balochistan. And within Balochistan, the pivot is the dusty, obscure coastal town of Gwadar. Gwadar has a spanking new deep water port. Wheels within wheels. Devices within devices.” It’s worth reading through to the end, if nothing else but because this little known part of the world deserves as many different voices as possible.

At the very least, both articles should leave you with a doubt in your mind about the original question as to whether Baluchistan is strategically more important than Afghanistan.

And then revisit another question I asked a year ago. Who will win the peace in Afghanistan?

India is joining US in stifling Iran trade, according to a WSJ report today:

The Reserve Bank of India instructed the country's lenders Monday to stop processing current-account transactions with Iran using the ACU. Last Friday, the central bank said Indian firms can't use the ACU mechanism when making payments for the import of oil or gas. While the earlier order didn't explicitly mention Iran, the Islamic republic is the only major crude exporter in the ACU.

Iran has ramped up its use of the clearinghouse by more than 50% this year compared to last year, after it advertised the clearinghouse to Iranian and Indian firms in early 2009 as a way to avoid having to use dollars for their transactions and thus "sidestep the U.S. banking system altogether."

The U.S. Treasury has regularly raised the issue with India for more than a year, according to officials briefed on the exchanges. Those conversations accelerated after President Barack Obama's visit to India in early November, when he endorsed India's bid to become a veto-wielding member of the U.N. Security Council and join the Nuclear Suppliers Group, the informal body that controls the trade in nuclear technologies.

The U.S. has been pushing allies to tighten the squeeze on Iran, whose nuclear program has aroused international fears. The U.N., the U.S. and the European Union began enacting new sanctions on Tehran in June. U.S. and European officials have said in recent weeks that they believe sanctions are exacting a growing toll on Iran. The Iranian currency dropped nearly 10% in October, as Iranian traders scrambled to obtain dollars. Iran's largest shipping company defaulted on over $500 million in debt in recent months as international insurers have refused to underwrite their cargoes.

Still, the long-term impact of the latest step by India and other recent sanctions remains unclear.

Here are some excerpts from an Op Ed piece "The US as Israel's Enabler in the Middle East" by KATHLEEN CHRISTISON:

Before the Egyptian-Israeli peace treaty, the United States never considered that Egypt was quite the strategic asset that it became when it surrendered its military capability in the interests of Israel. The same can be said about the United States’ relations with several other Arab states. Its involvement in Lebanon over the years -- including its effort to remove Syrian forces from Lebanon -- ---The recent Wikileaks releases of State Department cables and particularly al-Jazeera’s release of a raft of Palestinian documents dealing with negotiations over the last decade also demonstrate with striking clarity how hard the United States works, and has always worked, to help Israel in the Palestinian-Israeli negotiating process. U.S. support for Israel has never been a secret, becoming less and less so in recent years, but the leaked documents provide the most dramatic picture yet of the United States’ total disdain for all Palestinian negotiating demands and its complete helplessness in the face of Israeli refusal to make concessions. It is striking to note from these papers that the U.S. role as “Israel’s lawyer” -- a description coined by Aaron David Miller after his involvement in negotiations during the Clinton era -- is the same whether the administration is Bill Clinton’s or George W. Bush’s or Barack Obama’s. Israel’s interests and demands always prevail.

Beyond the Arab world, U.S. policy on Iran is dictated more or less totally by Israel. The pressure to attack Iran -- either a U.S. attack or U.S. support for an Israeli attack -- which has been brought to bear for most of the eight years since the start of the war on Iraq, ...---It has been clear to most analysts for years, even decades, that the United States favors Israel, but this reality has never been revealed so explicitly until recent events laid the relationship bare, and laid bare the fact that Israel is at the center of virtually every move the United States makes in the region. There has long been a taboo on talking about these realities, a taboo that has tied the tongues of people like my interlocutor. People do not mention Israel because they might be called anti-Semitic, they might be attacked as “singling out” Israel for criticism; the media fail to discuss Israel and what it does around the Middle East and, most directly, to the Palestinians who live under its rule because this might provoke angry letters to the editor and cancelled subscriptions by Israel supporters. Congressmen will not endanger campaign funds by talking honestly about Israel. And so Israel is taken off everyone’s radar screen. Progressives may “mention Israel in passing,” as my friend told me, but they do no more. Ultimately, because no one talks about it, everyone stops even thinking about Israel as the prime mover behind so many U.S. policies and actions in the Middle East.

India said Monday it may use its own currency, the rupee, to pay for oil imports from Iran in the face of a US-led sanctions campaign aimed at forcing Tehran to abandon its nuclear programme.

India has said it will continue to import oil from Iran, joining China in refusing to bow to intensifying US pressure not to do business with Iran.

India currently routes its dollar payments for Iranian crude through a Turkish bank -- an avenue that might be closed off as Washington ratchets up pressure on the Persian Gulf state.

"There are different (payment) options which are being evaluated and discussed. We are also considering the rupee as an option," Reserve Bank of India Deputy Governor H.R. Khan told reporters.

Indian officials say the country could pay partly for its Iranian oil imports in rupees that Iran could then use to buy Indian goods.

However, they say Iranian imports of Indian goods would not cover New Delhi's entire oil purchase bill.

India pays Iran about $1 billion every month through Turkey for the 370,000 barrels a day of crude oil it buys from the world's fourth-largest oil producer.

Khan said as of now there had been no disruption in the current payment arrangement.

But the Press Trust of India quoted a senior government official as saying there were indications from Turkey's state-run Halkbank that it would have to stop settling payments on behalf of Indian companies.

An Indian delegation visited Tehran earlier this month to discuss payment options.

India's Finance Minister Pranab Mukherjee told reporters in Chicago on the weekend that New Delhi would not scale down its petroleum imports from Iran despite US and European sanctions against the Islamic republic.

"We will not decrease imports from Iran," Mukherjee was quoted as saying by the Press Trust of India at the end of a two-day visit aimed at wooing US investment.

"Iran is an important country for India despite US and European sanctions on Iran.

"It is not possible for India to take any decision to reduce imports from Iran drastically."

The West fears Iran is trying to build a nuclear bomb. Tehran insists its nuclear programme is only for civilian use and refuses to abandon its uranium enrichment activities.

Here's a Reuters report on award of engg contract by Pakistan to a German-Austrian firm for Iran-Pakistan Gas Pipeline:

BERLIN – ILF Consulting Engineers, a German-Austrian company, confirmed on Monday that it is providing “advice and planning” work in the technological development of an Iranian-Pakistan pipeline project.

The German-Austrian involvement may violate US and EU sanctions barring the supply of technology to the Islamic Republic.

“Advisory and planning engineers” are working on the project, Rüdiger Ophoven, a spokesman for ILF’s gas and oil department, told The Jerusalem Post on Monday. He stressed that ILF is only involved in the Pakistani side of the project.

The Pakistan paper The Nation reported on Sunday that “according to the secretary of petroleum, Pakistan has offered $250 million to a German company, ILF Engineering, for laying the gas pipeline inside its territory.

The gas pipeline would be completed till 2014, the secretary added.”

Iran’s Persian- and English-language press reported extensively on the pipeline project and Germany’s role in its development.

When asked about the value of ILF’s contract, Ophoven told the Post that such a project is “less than 10 million euros.”

He said he did not know if ILF’s legal department had examined whether the deal violated US, UN or EU sanctions.

The United States pressed Pakistan in 2009 to refrain from entering into a pipeline agreement with Iran. However, the Pakistani government moved forward with its Iranian partners.

Austria and Germany are considered by experts in Europe to be the weakest links in the enforcement of the sanctions regime targeting Iran. Germany remains Iran’s most important EU trade partner, with an annual bilateral trade of roughly 4 billion euros.

Ophoven could not confirm or deny whether German regulators had approved the deal with Pakistan.

Nasrin Amirsedghi, a leading German-Iranian intellectual and a close follower of trade relations with Tehran, told the Post on Monday that chief executive officers of companies look “for a way to circumvent” the sanctions.

She criticized ILF’s explanation that it has a contract only with Pakistan.

“Do we want to prevent an atomic catastrophe in the Middle East? Do we want to support Israel and the Iranian people? Then all European and Western governments should end their diplomatic, cultural and scientific relations with Iran — the cancer of terrorism and war in the region,” Amirsedghi said.

She added that by severing relations with the Islamic Republic, the “sanctions will have an effect.”

Ophoven told the Post that the project entails a “1.5- to 2-year phase,” and there may be additional phases. ILF is providing the Pakistanis with “state-of-the-art technology” that deals with the know-how to build the pipeline project, he said.

Russian President-elect Vladimir Putin will, on his first foreign tour after taking office, make his first stop in Pakistan. It symbolizes not just Pakistan’s importance in the region, but the shift in relations which means that the two countries, kept apart for so many years because of Russia’s espousal of Communism, are trying to come together. Russia seeks a new ally in the region, to substitute for India, now in the American lap, after the collapse of the USSR. Mr Putin’s visit shows that Russia intends to play a more proactive role in world affairs. It must do so, because by ceding to US supremacy, it has seen it not just invade Afghanistan physically, but threaten Iran. Russia has found its own physical space threatened by US expansionism, with the expansion of Nato threatening it in the West, the snatching away of India and the occupation of Afghanistan threatening it in Asia. The visit is a result of the successful visits to Russia by President Asif Zardari, in August 2010 for the Quadrilateral Summit, and by Foreign Minister Hina Rabbani Khar earlier this year.

Russia had previously tried to make headway in Pakistan through the Steel Mills project, and now it has offered to be involved in the Iran-Pakistan gas pipeline project. This is an offer that Pakistan must not hesitate to take up. While Pakistan's official 'ally' has done its best to sabotage the project, and has insisted India withdraw from it, Russia is extending a helping hand. Unlike the steel mills, the pipeline from Iran is existential, providing as it will, gas not just for domestic and industrial users, but also for power production. Thus not just for strategic concerns, but national interest should incline Pakistan towards Russia. However, as strategic concerns include Afghanistan, which Russia has been deeply interested in for a very long time, Russia would also be interested in how Pakistan sees the future of Afghanistan.

It should also be recognized that Russia has a deep interest in the reset in relations between the USA and Pakistan that is presently being discussed by the joint sitting of Parliament. Russia too has seen that the US has not just gained access to South Asia through Pakistan, but also Central Asia. As Russia is seeking an ally in the region to substitute for India, and as Pakistan is distanced from the USA, Russia is naturally more interested in Pakistan than ever before. President Putin’s visit, the first ever by a Russian President to Pakistan, reflects that.

Here's a PakObserver report on possible US energy assistance for Pakistan:

With Pakistan fast heading to sign transnational pipeline project with Iran, US is most likely to offer a comprehensive but conditional energy assistance package as alternate to the Iranian gas.

According to diplomatic sources, the Obama Administration was contemplating to use a luring carrot this time to make Pakistan deliver in the so-called endgame in Afghanistan, besides refraining from translational gas pipeline from Iran.

Since the American strategists were working on a long-term plan to keep an influence centre in Afghanistan even after announced withdrawal of US/Nato troops from the war-torn country, they need Pakistan as a strategic partner even beyond war on terror. “That is why you hear a lot of talk back in Washington about focussing on Pakistan as a long-term partner rather than just a war ally or a facilitator of the endgame,” the sources pointed out.

The sources were of the view juxtaposition of anti-Iran and anti-drones sentiments in the American society may benefit this time in terms of a comprehensive American energy assistance package. “But this time the governments in Pakistan would have to deliver, if they really need their energy woes to be done away with,” the sources added. Consistent voices against the drones from within and outside Pakistan have perhaps made US Administration to understand that drones were practically appearing to be counter productive to the war on terror entering the decisive phase now, they underlined.

Other than strategic and political conditionality attached to prospective energy assistance package, the government in Pakistan would have to expand tax net, end blindfold government borrowing, and culture of vague subsidies.

When asked to comment on possibilities of a new US energy assistance package, US Embassy spokesperson Rian Harris said such proposals and details are not known at the embassy level in advance.

Asked what US law bars Pakistan or any other nation to indulge in business with Iran as India was also buying oil from the same country, she said, “US policy on Iran has not changed.”

“U.S. policy on Iran is well known. We have made it clear to all our interlocutors around the world that it is in their interests to avoid activities that may be prohibited by UN sanctions or sanctionable under U.S. law,” she went on.

“We recognise that Pakistan has significant energy requirements and US are committed to helping alleviate shortfalls,” Rain adds

She reminded, that is why we have invested in major energy infrastructure projects, such as renovating the Tarbela and Mangla dams, modernising the thermal power plants in Guddu, Jamshoro and Muzaffargarh, and building the Satpara and Gomal Zam dams.

These efforts have already added more than 400 megawatts of power to the national grid, and will add a total of 950MW — enough power for 2 million households — by the end of this year,” she said.

Asked how India was exempted from sanctions and buying oil from Iran, she said, “the National Defence Authorisation Act provides the ability to grant exceptions of 180 days to those countries that demonstrate they are significantly reducing their volumes of crude oil imports from Iran.

In December the Secretary of State granted exemptions to nine economies that demonstrated significant reductions of crude oil imports, including India.

Economies must take continuous steps to earn a renewal of the exemption for another 180 days through continued reductions in their purchases,” she concluded.

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I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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